Ten Key Principles of Economics

1. Everything has a cost. There is no free lunch. There is always a trade-off.
2. Cost is what you give up to get something. In particular, opportunity cost is cost of the tradeoff.
3. One More. Rational people make decisions on the basis of the cost of one more unit (of consumption, of investment, of labor hour, etc.).
4. Incentives work. People respond to incentives.
5. Open for trade. Trade can make all parties better off.
6. Markets Rock! Usually, markets are the best way to allocate scarce resources between producers and consumers.
7. Intervention in free markets is sometimes needed. (But watch out for the law of unintended effects!)
8. Concentrate on productivity. A country’s standard of living depends on how productive its economy is.
9. Sloshing in money leads to higher prices. Inflation is caused by excessive money supply.!!
10. Caution: In the short run, falling prices may lead to unemployment, and rising employment may lead to inflation.



Saturday, September 19, 2009

Calls To Tax Junk Food

As the battle over health care rages on, more people are focusing on consumer behavior and personal choice as a culprit behind escalating costs. There are many people who believe that if junk food consumption was reduced so would the pressures on our health system. Sin taxes on cigarettes have been a successful tool in discouraging smoking, could taxes on sugary sodas and snacks be a disincentive to consume. Opponents to this idea cite that excise taxes are regressive and would place additional pressures on the finances of low-income citizens. In addition, the difficult economy has led people to seek cheaper food sources which are often times the type of product targeted by this tax. Click on the link above and weigh in on this issue which seems to be gaining momentum.

Assignment that can accompany this reading:

HOW TO RESOLVE THE HEALTH CARE CRISIS?

Washington D.C. is currently wrestling with the age-old problem of how to provide affordable health care to every American without bankrupting our future and burying the issue under a pile of governmental bureaucracy. No one denies the facts that we inadequately deliver the service as we are woefully inefficient with our spending and far too many citizens find the necessity well beyond their reach. There are numerous suggestions on how to deliver health insurance differently but there is remarkably little discussion on how to impact demand. An obesity epidemic plagues our country and everyone understands that excessive weight creates a series of health problems that put debilitating pressures on our health care system. The article suggests a new tax that is gaining in popularity and is modeled after the highly successful “sin” tax on cigarettes.

In an essay, respond to the following points:

• What is the issue presented in this article?
• What are the arguments supporting the implementation of this tax?
• What are the arguments against the implementation of this tax?
• Using evidence from the article, express your view on whether this is a good or bad idea.
• How much of a role should personal responsibility play in the health care debate and what are some other ways in which personal behavior can be altered to reduce excessive demand and expensive procedures?

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